Fact 37. Joint ownership - what are the issues?
Joint ownership issues include the need to choose between joint tenancy or tenancy in common, clarity on financial contributions, inheritance rights, dispute resolution, and proper legal documentation.
Joint ownership is a common way for individuals to acquire property together, but it can give rise to a range of legal, practical, and financial issues. Understanding the intricacies of joint ownership and the possible pitfalls is crucial for anyone considering or already sharing property ownership.
Introduction to Joint Ownership
Joint ownership means two or more people share legal ownership of a property. It is often used by couples, relatives, friends, or business partners who want to share both the benefits and responsibilities of owning property. In UK property law, joint ownership usually takes the form of either joint tenancy or tenancy in common.
Types of Joint Ownership
Joint Tenancy
All owners have an equal share in the property.
If one owner dies, their share automatically passes to the other joint owners via the right of survivorship.
No individual ownership percentages are stated—owners own the whole property together.
Tenancy in Common
Each owner holds a specified, potentially unequal, share of the property.
Upon death, an owner’s share passes according to their will or intestacy, not automatically to other owners.
This form suits situations where owners contribute different amounts or want to leave their share to someone else.
Key Issues in Joint Ownership
Contribution Disparity
Disputes often occur if owners contribute unevenly to the purchase price or ongoing expenses.
Without a declaration of trust specifying each party’s ownership share, disagreements about entitlement frequently arise.
Inheritance and Succession
Joint tenancy’s right of survivorship may not suit owners with complex family arrangements who want their share to pass to heirs.
Tenancy in common allows owners to decide where their share goes on death.
Dispute Resolution and Severance
Conflicts may arise concerning sale, management, or use of the property.
Joint tenancy can be severed into tenancy in common, establishing defined shares.
This should be legally documented to avoid costly litigation later.
Common Disputes in Joint Ownership
Money Owed and Financial Contributions
One owner might feel they have paid more than their fair share, especially for renovations or mortgage payments.
Without clear agreements, recovering additional contributions may require legal action.
Unilateral Sale or Mortgage
No single owner can sell or remortgage the entire property without other owners’ consent.
Unauthorized attempts can lead to legal challenges.
Beneficial Interest Clarity
Ambiguity over beneficial interest (who really owns what) complicates sales, refinancing, or division of property.
Lack of documentation is a frequent cause of disputes if relationships break down.
Protecting Your Interest as a Joint Owner
Preparing a Declaration of Trust
Sets out each owner’s percentage share.
Details the division of sale proceeds, mortgage payments, and expenses.
Specifies actions in events like sale, separation, or death.
Independent Legal Advice
Each party should get individual advice before entering joint ownership.
This reduces risks related to undue influence or later disagreement.
Regularly Reviewing Ownership Arrangements
Update agreements when circumstances such as births, deaths, investments, or relationship changes occur.
Alternative Dispute Resolution (ADR)
Methods like mediation can resolve disputes more cheaply and amicably than court.
ADR helps in negotiating buyouts or new agreements.
Practical Tips for Joint Owners
Agree and document financial contributions upfront.
Choose the appropriate ownership type based on individual circumstances.
Regularly revisit and update ownership documents.
Seek legal help for severance or share clarification.
Plan for possible exiting of one owner.
Potential Risks in Joint Ownership
Lack of documentation can cause costly disputes.
Court involvement can deplete property proceeds.
Contributions like renovations may be unrecognised without proof.
Tax implications may arise from changing ownership structure.
Case Law Highlights
The Supreme Court decision in Jones v Kernott establishes that courts can determine ownership shares based on evidence of intention if circumstances change. This highlights the importance of clear documentation from the outset.
Role of the Conveyancer
Advising on the most suitable ownership type at purchase.
Explaining inheritance, tax, and dispute implications.
Preparing declarations of trust or handling joint tenancy severance.
Ensuring records and agreements are clear and comprehensive.
Coordinating with lenders regarding ownership requirements.
Consequences of Failing to Prepare
Ownership disputes can block sales or refinance.
Litigation may be expensive, stressful, and reduce equity.
Mortgage lending may be impacted without clear ownership.
Unintended inheritance or tax risks may occur.
Benefits of Proper Documentation
Prevents misunderstandings and legal battles.
Speeds dispute resolution.
Provides certainty for future property decisions.
Protects all parties and heirs.
Joint ownership can be a convenient way to buy property together but carries potential legal and financial risks without proper planning and clear agreements. Early legal advice, clear documentation, and regular review of arrangements empower joint owners to manage their property smoothly and avoid costly disputes.